CIBNCFS, CBAN say deployment of quality credit data is panacea for improved financial services industry

The promotion of effective credit risk operations through the deployment of quality and robust credit data management has been identified as the major critical factor that would ensure the emergence of a healthy financial services industry in Nigeria.
This was the submission of the Chartered Institute of Bankers Centre for Financial Studies (CIBNCFS) and the Credit Bureau Association of Nigeria (CBAN) at a business forum held in Lagos for stakeholders in the country’s financial services landscape to discuss the relevance of Credit Data Management in the industry. The forum was organised by CBAN in conjunction with CIBN
Mr. ’Seye Awojobi, the Registrar/Chief Executive, Chartered Institute Of Bankers Of Nigeria (CIBN), represented by Mr. Segun Shonubi, Deputy Director, Membership Services, while presenting a keynote address at the forum said that the need for a more deliberate policy action on credit data management became pronounced in recent years due to the fast-paced and changing regulatory and reporting requirements, such as the need to comply with Basel III.
He stated that the unprecedented evolving dynamics in the financial services industry with fundamental shifts in customers’ demands and expectations had aroused a new interest in credit data management adding that without a very strong monitoring template using technology, predatory debtors can deploy the same technology to break all boundaries designed for determining their true credit histories.
Citing the Central Bank of Nigeria’s Financial System Stability Report which revealed that the banking industry’s Non-Performing Loans ratio rose from N1.678 billion in June to N2.084tn in December 2016 he warned that this does not augur well for the financial intermediation role of the financial services industry and the economy at large. .
While noting that globally, ease of access to credit was critical for business growth, Mr. Shonubi said that lending institutions are always wary of the safety of their funds. Reaching a delicate balance, he continued, is the sole objective of an effective credit data management and credit risk strategy by financial institutions.
Going down the history lane, he said: “According to the Central Bank of Nigeria (CBN), the late 1980s and early 1990s witnessed rising non-performing credit portfolios in banks and these significantly contributed to the financial distress in the banking sector. The apex bank also noted that it was the existence of predatory debtors in the banking system whose modus operandi involved the abandonment of their debt obligations in some banks only to contract new debts in other banks”.
He continued, “As a result of this ugly trend in the industry in the early 1990s, the CBN established a Credit Risk Management System that would provide a central database from which consolidated credit information on borrowers could be obtained. This led to the decision to create a credit bureau by CBN which was given a legal backing by the CBN Act No.24 of 1991 [sections 28 and 52] as amended”.
He noted however that weak credit data management is a phenomenon that is not peculiar to Nigeria alone, but cuts across different countries’ financial services industries pegging this on a 2015 research carried out by Crowe Horwath LLP, in which bank executives across the globe were asked to characterize their organizations’ capabilities for managing and analysing credit data.
The CIBN Registrar mentioned that of the more than 110 bank executives who responded, barely one-third (34 percent) said their institutions had comprehensive credit data and analytics management capabilities. Nearly a quarter (23 percent) had no formal credit data programme or management capabilities in place. The remainder (43 percent) either had limited, “boutique”-style data capabilities or had effective data but no analytics capacity.
He stated that in ensuring a robust credit history of borrowers, CBN licensed three private credit bureau in 2008, enumerating the functions of the credit bureaux to include the collection of factual credit information such as credit cards, cars, home, personal and education financing, from its data providers; strengthening the credit appraisal procedure of banks and other lending agencies by providing reliable credit information on borrowers; storage and dissemination of credit data; monitoring of over-exposures to borrowers; facilitating consistent classification of credits amongst others.
Furthermore, Mrs. Mobolanle Adesanya, the Chief Executive Officer/Managing Director XDS Credit Bureau/Chairman, CBAN, represented by Mr. Olanrewaju Agbede, Head of Sales and Marketing, XDS Credit Bureau in a presentation titled ‘Nigerian Credit Reporting Act: Promoting Effective Credit Risk Operations In Nigerian Banking Sector’ said that the recently signed Credit Reporting Act was meant to promote responsibility in the credit market by encouraging responsible borrowing, avoidance of over-indebtedness and fulfilment of financial obligations by all parties.
According to him, the Act would not only guarantee more robust Credit Reporting System in the country, but it would promote financial inclusion and also improved credit information sharing between financial and non-financial sectors and ensure more solid platform for better access to finance for SMEs with more influx of Credit Information on Data Subjects.
He said that the Act allows the credit information providers to receive services from a Credit Bureau subject to the execution of a Data Exchange Agreement with the Credit Bureau and with the consent of the Data Subject and to also maintain the integrity and protection of data submitted by it to a Credit Bureau.
The forum, which was organised to address the prevalent issues with Data quality as well as create awareness on the existence of the Credit Reporting Act in Nigeria, was attended by various stakeholders in the country’s financial services sector including representatives of Commercial Banks, Micro Finance Banks, Financial Technology Companies and insurance companies.